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On the environmental Kuznets curve with fossil-fuel induced emission: Theory and some illustrative examples

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  • Sushama Murty

    (Department of Economics, University of Exeter)

Abstract

We propose a model of fossil-fuel induced emission, which permits multiple emission-mitigation strategies. In a differentiable framework, we derive a set of necessary and sufficient conditions for an environmental Kuznets curve in terms of the relative responses of the preference and technology-based shadow prices of emission to changes in the economic resource base when the emission policy is not allowed to adjust. Employing these conditions we construct examples of preference and technology combinations that result in an EKC in both static and dynamic frameworks. In these examples, optimal emission-mitigation strategies include employing a part of available resources for cleaning-up activities and inter-fuel substitution from dirtier to cleaner energy inputs. We show that the social optimum can be decentralised not only through standard emission policies such a Pigouvian tax, but also by a scheme that subsidises cleaning-up activities and taxes the usage of fossil fuels.

Suggested Citation

  • Sushama Murty, 2014. "On the environmental Kuznets curve with fossil-fuel induced emission: Theory and some illustrative examples," Discussion Papers 1406, University of Exeter, Department of Economics.
    • Handle: RePEc:exe:wpaper:1406
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    References listed on IDEAS

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    1. Sushama Murty, 2014. "Necessary and sufficient conditions for an environmental Kuznets curve with some illustrative examples," Discussion Papers 1407, University of Exeter, Department of Economics.

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    More about this item

    Keywords

    Environmental Kuznets curve; marginal abatement cost; marginal willingness to pay; fossil fuels; inter-fuel substitution; abatement effort;
    All these keywords.

    JEL classification:

    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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